In this course you will learn how companies decide on how much debt to take, and whether to raise capital from markets or from banks. You will also learn how to measure and manage credit risk and how to deal with financial distress. You will discuss the mechanics of dividends and share repurchases, and how to choose the best way to return cash to investors. You will also learn how to use derivatives and liquidity management to offset specific sources of financial risk, including currency risks. Finally, You will learn how companies finance merger and acquisition decisions, including leveraged buyouts, and how to incorporate large changes in leverage in standard valuation models.
Upon successful completion of this course, you will be able to:
• Understand how companies make financing, payout and risk management decisions that create value
• Measure the effects of leverage on profitability, risk, and valuation
• Manage credit risk and financial distress using appropriate financial tools
• Understand the links between payout policies and company performance
• Use derivatives and liquidity management to offset financial risks
• Pick an appropriate financing package for an M&A or leveraged buyout deal
This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

De la lección

Module 2: Understanding Debt Financing and Payout Policy

In Module 2 we will dig deeper into the mechanics and the institutional details that are important to understand debt financing. We will learn models that allow us to link default probabilities to yields on a company’s debt. We will discuss the roles of credit ratings and credit default swaps for debt markets. We will learn the importance of non-price contractual terms such as debt covenants, collateral and seniority. We will use this knowledge to understand how companies choose between bank debt and bond financing. Finally, we will discuss how payout decisions (dividends and share repurchases) affect firm value and how companies choose their optimal payout policy.